TRADE-US/VIETNAM: Landmark Trade Accord Signed

By Jim Lobe Reprint | | Print |

Jim Lobe

WASHINGTON, Jul 14 2000 (IPS) - The United States and Vietnam Thursday signed a landmark trade agreement, 25 years after the end of the Vietnam War.

The accord, which concludes four years of negotiations, marks a milestone in normalising ties between the two former enemies, as well as a significant benchmark in US President Bill Clinton’s efforts to open markets around the world.

It should also spur substantially greater US investment in Vietnam, where foreign investment has plunged from more than 2 billion dollars a year in the mid-1990s, when it was seen as the next big Asian economic “tiger,” to only 500 million dollars in 1999.

“With this agreement, Vietnam has agreed to speed its opening to the world,” Clinton said in a brief White House Rose Garden ceremony. “This is another historic step in the process of normalisation, reconciliation, and healing between our two nations.”

The agreement must still be submitted to the legislative branches of each country for ratification. While Congress is very likely to approve the pact, it may wait until next year to do so because of the tight legislative calendar between now and the elections in November.

The accord, which followed a week of negotiations here between US Trade Representative Charlene Barshefsky and Vietnam’s Trade Minister, Vu Khoan, is similar to one concluded “in principle” one year ago, but never signed.

It ran into resistance from conservative forces within the government who feared that the country was not ready for the kind of opening required under the pact and who objected to certain specific provisions which Washington had not demanded of its other trading partners.

The same forces were bolstered by the fact that Vietnam was largely untouched by the Asian financial crisis which swept the region in 1997-98 precisely because, in their view, the economy was insulated from the turmoil caused by the movements of global capital.

But, with the plunge in foreign investment and the slowing down of Vietnam’s economy, the country’s leadership decided to go ahead, a sign, according to many analysts, that Hanoi is now committed to further economic reform.

“This agreement was vetted widely in the government,” according to Virginia Foote, president of the US-Vietnam Trade Council. “It definitely means there is a far greater consensus in Vietnam that this will be good for the country.”

Two-way trade in 1999 stood at less than 1 billion dollars last year, about two-thirds of which consisted of Vietnamese exports – mostly textiles, footwear, and other assembly products – to the United States.

Under the new agreement, trade in both directions could increase sharply.

Under the accord, Vietnam will receive normal trade relations (NTR) status. That means tariffs on exports to the United States should fall from an average of 40 percent today to only three percent when it takes effect. Quotas and other non-tariff barriers will also be reduced.

This could have a major impact, particularly in attracting US apparel, footwear, toy and electronics companies which have long been eager to take advantage of Vietnam’s large and low-cost labour force. Even without the tariff reductions promised by the agreement, the US shoemaker, Nike, had already become the country’s largest single employer in the space of just a few years.

The United States could quickly become Vietnam’s biggest export market under the new pact, according to a number of trade analysts here.

In addition, the United States agreed to support Vietnam’s accession to membership in the World Trade Organisation (WTO).

For its part, Vietnam will also sharply reduce tariffs, gradually eliminate non-tariff barriers, grant national treatment to US products, guarantee intellectual property rights, and provide significantly increased market access to key sectors, including banking, insurance, telecommunications, tourism, information, engineering and construction, of interest to US investors and service industries.

US food exporters and consumer-goods producers eager to sell to Vietnam’s 80 million people, and heavy-equipment and commercial- aircraft manufacturers, and big construction and telecommunications companies hoping to rebuild the country’s crumbling infrastructure are among those which are most eager to sell to Vietnam.

Thursday’s agreement marks the culmination of a long, slow process of normalisation between the two countries since the Vietnam War in which some 58,000 US servicemen and as many as 3 million Vietnamese were killed. Initial efforts by Jimmy Carter in the late 1970s to begin a dialogue were scotched by Vietnam’s invasion of Cambodia. Hanoi’s close ties with the Soviet Union at a time of intensified superpower competition during most of the 1980s made any kind of rapprochement under Ronald Reagan virtually unthinkable.

Frozen attitudes began to thaw, however, after Mikhail Gorbachev took power in the Soviet Union, and in 1987, Reagan sent a retired general to Hanoi for talks on joint co-operation with Vietnam on accounting for US soldiers missing in action during the war. Under George Bush, those efforts were expanded, particularly in 1991, when Washington opened a US government office in Hanoi and offered a “roadmap” of steps both sides would take to improve relations.

Many analysts believed that Clinton, who had opposed the Vietnam War in his student days, would speed up the process when he took office in 1993. But the new president, sensitive to right-wing charges that he had evaded the military draft, proceeded, if anything, with greater caution.

In 1994, he lifted the 19-year trade embargo against Vietnam, but only after the US Senate, led by former Vietnam War veterans, publicly urged him to do so. The following year, he announced the normalisation of diplomatic ties with Vietnam, but only after the hawkish Veterans of Foreign Wars announced its support for the move.

Consistent with that pattern, Clinton presided over Thursday’s signing ceremony flanked by lawmakers who had served in Vietnam, most prominently Republican Sen. John McCain, a champion of the normalisation process who was held by Hanoi as a prisoner of war for more than five years.

Despite Clinton’s caution on Vietnam, ties between the two countries on the diplomatic and military level have proceeded more rapidly, particularly after the United States and China almost came to blows over Taiwan in 1996. Since Vietnam and China fought a brief war in 1979, Hanoi, as the dominant power in Indochina, has been seen by Washington as a possible check on China in Southeast Asia.

In the past eight months, Hanoi has hosted Secretary of State Madeleine Albright and Defence Secretary William Cohen, and on Thursday, Clinton himself left open the possibility of visiting Vietnam before his term expires in January, 2001.

Thursday’s agreement caps several months of major victories on the trade front for Clinton whose major foreign-policy legacy after eight years in office may indeed be a more open world economy. In early May, Congress passed long-stalled legislation designed to promote US trade and investment in the countries of the Caribbean Basin and sub-Saharan Africa.

At the end of May, he won his biggest trade fight since the landmark 1993 North American Free Trade Agreement (NAFTA) when the House of Representatives approved permanent NTR (PNTR) for China despite strong opposition from within his own Democratic Party. The Senate is expected to approve the measure with relative ease later this month.

Once PNTR is approved, US companies will be able to take advantage of a sweeping, if one-sided, trade accord negotiated with Beijing last November. The accord paves the way as well for China’s accession to the WTO.